Biggest Problems in Real Estate

    I frequently reference what I think is the biggest problem in real estate – hundreds of thousands, if not millions, of buyers sitting on the sidelines because the media are scaring the sh*t out of them with FALSE headlines about a pending real estate crash.

    It is happening again this week in fact, as CNBC’s Diana Olick is again blatantly misinterpreting the latest housing market data in an effort to convince us we are all doomed (tomorrow’s blog).

    Anyway, it is very ironic that the 2nd biggest problem in real estate is one of the main reasons why the media are so wrong with their predictions of doom.

    2nd Biggest Problem in Real Estate = 600,000 Active Listings

    Per our friends at FRED, there were fewer than 600,000 active listings at the end of February in the entire country.

    This is not only close to an all-time record low, but it is also a very far cry from the FOUR MILLION listings we had in 2007 prior to the 2008 meltdown.

    And – as we all know now, the primary reason there are so few listings is “Mortgage Rate Lockdowns.”

    Sellers do not want to sell their homes, if they have an interest rate of 3% or less, when they have to buy a new home in a 6% to 7% interest rate environment.

    Unintended Consequences

    As a quick sidebar, this is an excellent example of the unintended consequences of government action.

    When the Fed helped push rates down to record-low levels, we all cheered – thinking what could go wrong?

    Well… home values were pushed through the roof, many buyers could not compete in multiple bid situations, and now we have a severe inventory shortage.

    Solution to the 2nd Biggest Problem = Lower Rates

    Fortunately, we will likely see a solution to the 2nd biggest problem this year, as rates are very likely to fall – for reasons I have mentioned about 738 times (give or take).

    Barry Habib continues to focus on falling inflation as the reason rates will fall, and he brought it up again today in his morning update.

    NOTE THOUGH that Mr. Habib expects rates to go UP tomorrow, as he thinks tomorrow’s scheduled inflation report will be WORSE than expected; he does not expect the really beneficial inflation reports to surface until May.

    Jeff Snider, in contrast to Mr. Habib, is focusing on the extreme likelihood of continued financial crises, involving banks in particular.

    Snider is looking at the mad scramble by banks for more liquidity and better collateral as indications of the severity of the current crisis, pointing out how we saw similar mad scrambles for liquidity in 2020 when COVID hit and in 2008.

    If readers want more info or details, they might listen to Mr. Snider’s podcasts this week.

    In any case, I tend to believe Mr. Snider because he has not failed us yet, and more crises mean much lower rates.

    And much lower rates will likely result in many more listings.

    Problem solved.

    The rest of the world may melt down later this year, but we in the mortgage and real estate worlds will likely be very busy (not unlike what happened during the COVID lockdowns).

    Expected Lifespan of CALHFA’s Dream Program: < 90 Days

    This a brief reminder that CalHFA’s Dream For All Program (100% financing/shared equity program) will very likely run out of funds in the near future.

    Hence, agents and borrowers need to move quickly if they want to take advantage of it.

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